Resilience required in challenging year for DSW
A decline in revenue due to lower volumes of deals made for a “challenging” year for listed advisory business DSW.
As previously trailed in a market update in May, network revenue for the year to the end of March 2024 was down 12.5% to £16.0m (FY23: £18.3m) reflecting a decline of 20.6% in average revenue per Fee Earner to £153k (FY23: £193k).
Pre-tax profit of £207,000 represented a drop from £705k in the previous year.
However, this was mitigated by a 10.3% increase in fee earners to 107 (FY23: 97), driven by investment in recruitment and acquisitions.
James Dow, Chief Executive Officer, said: “Our strategic aim remains to have a more resilient and diversified group of licensee businesses. At present, corporate finance and due diligence represents the majority of our business (68%, flat vs. the previous year). As communicated at the time of our IPO, DSW aims to scale its licence model through organic growth of existing licensees, recruitment of new licensees, investing in “Break Outs” (existing teams in larger firms) and the acquisition of licence fees.
“We are confident in the strength of our business model to continue to attract Fee Earners, and we have a strong balance sheet to support that. We remain confident that our considerable efforts to both acquire licence fees and recruit teams will continue to bear fruit.”
Income from advising on deals represented 68% of the total revenue, including a drop in the average revenue per fee earner over the period which was also lower at £153k (FY23: £193k).
The number of fee earners in the business increased from 97 to 107 and the number of partners increased from 42 to 50.
DSW operates a licence model to entice teams of advisers from other firms to operate under their brand and service their contacts, often in a regional market, including specialists in the Midlands and Cardiff.
Over the year they added 5 new licensees to the 20 existing businesses in the stable, creating what they describe as “a stronger platform for organic growth as market conditions for M&A become more favourable.”
New licensees are being sought in new service lines not reliant on M&A, to add to two complementary acquisitions in tax advisory and business recovery.
DSW’s balance sheet remains healthy with cash balances at 31 March 2024 of £2.6m (FY23: £4.6m), after the acquisitions of Bridgewood, an insolvency practice, and STS Europe, a tax advisory practice (£0.9m consideration), investment in new start-up licensees of £0.5m and paying dividends of £0.7m in the Period.
The Board remains confident in the long-term prospects for the business and continues to add new Partners and new licensee businesses to fuel future growth. While confidence in the long term performance of the Group remains unchanged, the Board acknowledges the suppressed earnings in the Period and has taken the decision to propose a reduced final dividend of 0.75p (FY23: 2.0p), giving a total dividend for FY24 of 2.0p (FY23: 3.76p). The Board anticipates maintaining dividends at a reduced level until market conditions improve and earnings return to growth.
In May 2024 Dow’s anointed successor Nicole Burstow left the business with Shrutisha Morris due to join as deputy CEO in August 2024, while Pete Fendall joined the board as COO and Interim CFO as of 1 April 2024.
